Small Ventures, a Houston-based venture capital firm, has sued Rizvi Traverse Management, alleging that Rizvi misled it about the commercial viability of the movie Tekken.
Small Ventures claims that Rizvi co-founders Suhail Rizvi and John Giampatropni convinced it to invest more than $10 million in the video game adaptation, falsely claiming that box office success was not critical because the money would be recouped from pre-sold foreign rights. Tekken ultimately earned less than $1 million.
The lawsuit, which was filed 23 August in federal court in Houston, seeks damages, restitution and legal fees for “fraud, gross negligence and breach of fiduciary duties”, according to the lawsuit.
Spokespeople for Rizvi Traverse and Small Ventures did not return calls for comment.
Detroit-based Rizvi Traverse helped Hugh Hefner earlier this year take Playboy Enterprises private.
In January, Playboy’s board approved a second bid from Hefner and Rizvi Traverse of $6.15 per share. The offer valued the company at approximately $177 million.
Hefner and Rizvi first tried to take Playboy private in July 2010, bidding $5.50 per share for the company.
Rizvi Traverse was raising its second “Opportunistic Equity Fund,” which had collected $106 million as of 2 September 2010, according to an SEC filing.